SDLT-V: Could this be the end for Homes Under the Hammer?
Property programmes are a staple of the television schedules in England and Wales and can often be used as a barometer of the residential property market.
When markets are down, programmes encourage homeowners to make homes their own and not worry too much about how prospective alterations may affect resale values. "If you have you always wanted a gold painted dining room with lion’s head plaster wall lights and a zebra-print feature wall, just go for it!” they cried, “It is your home and you will be here for the long-term after all”. The opposite has been the case when markets are up, with programmes encouraging the merits of neutral colours and conservative decision-making in having your property appeal to the widest possible market. Making a quick-buck was the order of the day, telling people how to maximise value in a booming market.
As we stand on the brink of yet another sea-change in the residential property market, all of this brings me to ponder the future of a staple of the BBC daytime schedule for the last twelve years, Homes Under the Hammer.
For those of you unfamiliar with the format, the programme follows largely amateur property developers in their efforts to secure a bargain at auction, carry out light-touch renovations, and realise a short-term profit either in outright value or increased rental yields. While it might not match Homeland for drama, it has captivated audiences for over a decade, lifting the lid on the amateur property development industry and, presumably, motivating many to get involved.
The changes to the Stamp Duty Land Tax (SDLT) regime from 1 April 2016 for purchases of additional residential properties have been introduced by the Government to reduce multiple home ownership in an attempt to boost the housing stock available to first time buyers. As a result, it is almost certain that the vast majority of amateur developers and small scale landlords who form the core of the Homes Under the Hammer format will be caught by the additional 3% SDLT surcharge on each and every incremental rate, significantly increasing costs and squeezing already tight margins.
It is easy to see how these changes could have a significant effect on this corner of the market (without even considering forthcoming restrictions on mortgage interest relief), both with new entrants being deterred by the higher costs of entry, and existing players being forced to leave the market or at least scale back future plans. In some parts, the changes have been described as “the final nail in the coffin for small landlords” given that in some cases the changes could result in a 10 fold increase in the tax liability (assuming a purchase price of £150,000).
With so many properties now being marketed as perfect buy-to-let opportunities, not least in the London new-build market, a fall in demand due to prospective buyers re-evaluating the attractiveness of such investments could have a significant impact not only in the investment sector but on the wider market, at least in the short-term. But more than that, there is a risk that the less glamorous, neglected properties in need of the sort of restoration undertaken by the stars of Homes Under the Hammer will remain neglected and not be brought to market as a result. It is not too much of a stretch to suggest that the changes in the SDLT regime could not only supress demand for investment properties, but also lower supply as potential small-scale developers and landlords are discouraged from taking on renovation projects for investment purposes.
Homes Under the Hammer faces these same challenges. With the normally bustling auction houses likely to be that much quieter at least in the short-term, they may struggle to find the same number of affable first-time investor/developers who are willing to be followed around by a film-crew, but the problems could well go deeper than that. The new future being brought in by these latest changes to the SDLT rules could well be a place where the focus of their format no longer has the accessible, aspirational edge that it once did. With the medium of television being a dedicated follower of fashion, Homes Under the Hammer, like this corner of the industry, could well be facing an uncertain future.